The E&C Pulse - February 7, 2019

Is Your Organization Ready for a Skeleton in the Closet? 

This time it’s a politician, Virginia Gov. Ralph Northam, who finds himself under siege and facing calls for his resignation after racist photos on his medical school yearbook page surfaced.

But it could be any business executive with a skeleton in his or her closet, racial or otherwise, that threatens to put an organization at risk of having to clean up a mess, and to bear the financial and reputational consequences for the long-ago illegal or socially reprehensible actions of a CEO or board chairman.

It’s an emerging risk for organizations, as social media has amplified the reach and reaction to anything deemed offensive or inappropriate that gets unearthed by the discovery of an old college paper, a yearbook, a tweet, Instagram post or video stashed on a phone or a Facebook page.

Companies have to wonder how well they did their checks of top executives, if they did one, and whether there's a ticking time bomb just waiting to detonate.

In the case of Virginia, the mess is growing, as the lieutenant governor is facing accusations of a long-ago sexual assault, while the state's attorney general--third in line for the governorship--admitted he wore blackface in college.

There are no true standards or regulations regarding high-level background checks and investigations in the U.S., said Don Aviv, president of Interfor International, which conducts due diligence and investigative checks for corporations.

Companies and organizations set their own standards depending on the level of the employee under consideration, the industry they are in, the inherent risks the company or its industry faces, and how much they want to spend, he said. 

Many states have enacted specific rules that may limit the usage and review of criminal records, drug testing or reference checks, while others have enacted rules to govern the investigation of someone’s social media activity, said Aviv. 

Aviv’s company conducts background checks that tend to go back 20 years and cover countries, states and counties where a person has lived, worked or spent considerable time. 

”Standard background checks...are worthless and often counterproductive as they are too limited and tend to miss critical issues,” said Aviv. “There should be a greater focus on social media than is currently considered standard practice.

Bubbling beneath the surface

It’s an issue recently faced by Meredith Eaton, director of North America for corporate communications firm Red Lorry Yellow Lorry, who had to help a client through a similar situation involving an employee’s private social post, which “sparked a deep search from trolls through years of his personal profile posts, uncovering a lot of not-very-nice stuff,” she said.

After an incident, Eaton said companies need to distance themselves from an offending individual by publicly stating the person’s actions and beliefs don’t represent the company. Depending on the severity of the situation, and position the person holds, the company may need to fire the employee.

Where it gets trickier, she said, is when there’s no incident to spark awareness or action, and “there may be something ugly bubbling under the surface,” waiting to be discovered. “Beyond certain legal and government bodies, it’s often difficult for companies to dedicate resources to such thorough background checks, especially if social profiles are private and blocked,” said Eaton.

And this danger is real, as digitalization of once-outdated public records is making old information from the past more readily available in online searches, said Shannon Wilkinson, chief executive of Reputation Communications, a reputation management company.

Combine that with the microscopic attention being paid to politicians, celebrities and big-time business executives, and what once would remain a legal notice published long ago in a college-town newspaper now appears on the first page of a person’s Google results if the newspaper’s archive is digitized, she said.

All of this raises the likelihood of a deliberate reputational attack upon an individual or organization, said Wilkinson. “They may be biased or have something to gain from such an action. Or, they may be a concerned citizen, a former harassed employee or an abused ex-spouse,” she said.

If the search turns up something negative, a careful examination of how the organization’s employees, clients, other stakeholders and the media will react should be undertaken and assessed, said Nick Kalm, chief executive of Reputation Partners, a crisis management firm.

“Can the issue be overcome or not? It’s a judgment call,” said Kalm. “The mores and customs of even 20 years ago are very different, and in 2019 many publics don’t forgive actions that may have seemed innocuous enough in 1999.” 

So, what’s fair game for these background checks? Anything after college, for certain, said Kalm, adding it’s a judgement call for actions that took place in college. As for high school-era transgressions, he said would have to be something really outrageous for that to be a disqualifier.

“If you’re a high schooler, manifesting bad judgment is almost part of your job description,” said Kalm. ”Holding someone in high school responsible for, say, wearing a hat that offends some people should not disqualify them from someday being CEO of Disney, for example.”

(CORRECTS to say Northam attended medical school, not law school.)

 

Ben DiPietro
@BenDiPietro1
ben.dipietro@lrn.com

 

The average CEO of a company in the Russell 1000 received total compensation in 2018 that was 248 times more than the average pay of an employee, according to an analysis prepared by Bloomberg. At companies where median employee pay was below the poverty threshold of $25,750 for a family of four, the CEO pay ratio was 917-to-1. The ratio was 20-to-1 in 1965.